HOWTO  PROCURE-.GARITAL 

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DISTRIBUTIVE 


OF  THE 

UNION  SUPPLY  &  MUTUAL  BENEFIT 

CO-OPERATIVE  ASSOCIATION. 


A.  R.  FOOTE, 

NEW  YORK. 


BROOKLYN,  E.  D.  : 

M.  S.  Vernon,  Printer,  134  Franklin  Street, 
1879. 


1 


H.Payia 


HOW  TO  PROCURE  CAPITAL 


FOR  A  DISTRIBUTIVE  BRANCH  OF- THE  .  , 

>  >  •>  1  ^  o  jo  o  ’  %  t 

UNION  SUPPLY  ANP  MUTUAL  BENEFIT 

'>  ©  ,,  1  }  *  *  ]  *>  O  '  J  -> 

CO-OPERATIVE  ‘  ASSOCIATION. 


‘‘Capital,  by  persons  wholly  unused  to  reflect  on  the  subject,  is 
t  supposed  to  be  synonymous  with  money.  Money  cannot  in  itself  per¬ 
form  any  part  of  the  office  of  capital,  since  it  can  afford  no  assistance 
to  production.  To  do  this,  it  must  be  exchanged  for  other  things,  and 
anything  which  is  susceptible  of  being  exchanged  for  other  things,  is 
v  capable  of  contributing  to  production  in  the  same  degree.  What 
capital  does  for  production,  is  to  afford  the  shelter,  protection,  tools  and 
materials  which  the  work  requires,  and  to  feed  and  otherwise  maintain 
the  laborers  during  the  process.  Whatever  things  are  destined  for  this 
use — destined  to  supply  productive  labor  with  these  various  prerequi¬ 
sites — are  capital. 

*****  **** 

The  distinction  between  capital  and  not  capital  does  not  lie  in  the 
kind  of  commodities,  but  in  the  mind  of  the  capitalist — in  his  will  to 
employ  them  for  one  purpose  rather  than  another  ;  and  all  property, 
however  ill  adapted  in  itself  for  the  use  of  laborers,  is  a  part  of  capital, 
so  soon  as  it,  or  the  value  to  be  received  from  it,  is  set  apart  for  pro¬ 
ductive  re-investment.  ****** 

To  consume  less  than  is  produced  is  saving  ;  and  that  is  the  pro¬ 
cess  by  which  capital  is  increased  :  not  necessarily  by  consuming  less 
absolutely.  ”f 

WHAT  IS  CAPITAL? 

As  has  been  stated  in  the  above  quotation,  “  The  dis¬ 
tinction  between  capital  and  not-capital,  lies  in  the  mind  of 
the  capitalist — in  his  will  to  employ  whatever  he  may 
possess,  for  one  purpose  rather  than  another.”  By  the 
same  author  it  is  logically  shown  that,  what  is  capital  under 
one  set  of  circumstances,  is  not  capital  under  different 
circumstances.  His  briefest  definition  is,  “  Capital  is  ivealth 
appropriated  to  reproductive  employment .”  While  this  is  true, 
there  is  a  much  broader  sense  in  which  the  word  capital 
may  be  defined,  all  wealth  is  not  appropriated  to  reproduc¬ 
tive  employment  primarily.  A  very  large  share  of  wealth 
is  appropriated  to  distributive  employments,  yet  it  is  capital 

j  t“  Principles  of  Political  Economy.”— J.  S.  Mill. 

ZG  ZZ.'S 


4 


for  the  purpose  for  which  it  is  used ,  as  mucli  as  it  would  be  were 
it  used  in  primary  reproductive  employment.  Any  employ¬ 
ment  of  capital  by  which  it  reproduces  itself,  is  reproductive 
employmept.in  .the.  l^raader  sense  of  the  term,  although  the 
autliority*j4^ted  jnojt  appear  to  use  the  term  in  that 

sense  ;  as*  he*Sayg  :*  * . 

t  “  The  jajle  pityULCtf  iitoney ,  and  the  subsequent  expendi¬ 

ture  of  tfie  $ipneVtm  feuyUtgl  <2>.tliefc*  commodities,  are  a  mere  exchange 
of  equmtlertt  ‘values* for  faiutual  accommodation. 

We  cannot  fcoq  sjffiqtty.TtjBpr^sent  to  ourselves  the  operation  of  ex¬ 
change,  wliejSieif  t> j-  barter,  or  through  the  medium  of  money, 

as  the  mere  mechanism'  tty*  \ChWh  each  person  transforms  the  remunera¬ 
tion  of  his  labor  or  of  his  capital  into  the  particular  shape  in  which  it 
is  most  convenient  to  him  to  possess  it ;  but  in  no  wise  the  source  of 
the  remuneration.” 

While  it  is  logically  true  that  the  source  of  all  remunera¬ 
tion  is  the  product  of  wealth  appropriated  to  reproductive 
employment  primarily,  it  is  equally  true  that  the  buy¬ 
ing  and  selling  of  such  product  is  not  “an  exchange  of 
equivalent  values  for  mutual  accommodation.”  The 
business  of  distribution  or  exchange  is  not  carried  on, 
by  those  engaged  in  it,  for  the  accommodation  of  any  one, 
but  for  the  purpose  of  realizing  a  profit  upon  their  capital 
and  labor,  in  exactly  the  same  wray  and  for  the  same  reason 
that  primary  producers  realize  their  profit  by  obtaining  for 
the  article  exchanged  or  sold,  more  than  it  cost  them.  For 
this  reason,  “when  a  person  transforms  the  remuneration 
of  his  labor  or  of  his  capital  into  the  particular  shape  in 
which  it  is  most  convenient  to  him  to  possess  it,”  he  parts 
with  more  wealth  than  he  receives.  It  is  this  loss  of  wealth 
by  the  masses,  who  exchange  with  the  merchant,  that  keeps 
them  poor  and  causes  their  wealth  to  be  absorbed  in  this 
process,  by  the  comparatively  few  persons  who  carry  on  the 
business  of  exchange. 

The  object  of  all  business  transactions  is  to  cause  the 
capital  employed  to  reproduce  itself  with  a  profit. 

If  a  primary  producer  sells  what  he  produces  at  less 
than  the  cost  of  production,  he  decreases  his  capital.  If  he 
sells  at  the  cost  of  production,  he  effects  “  an  exchange  of 
equivalent  values,”  and  his  capital  remains  stationary.  If 
he  sells  for  more  than  the  cost  of  production,  he  increases 
his  capital.  The  profit  is  the  remuneration  of  the  venture. 
The  same  fact  is  true  of  the  merchant,  who  either  decreases, 


t  “Principles  of  Political  Economy.”— J.  S.  Mill. 


5 


keeps  stationary  or  increases  his  capital  by  the  result  of 
each  venture,  as  the  amount  he  receives  is  greater  or  less 
than  the  cost^  to  him  of  the  article  sold.  From  this  it  is 
plain  that  to  sell  at  more  than  cost, and  to  save  the  difference, 
is  the  process  by  which  capital  is  increased  by  producer  or  ex¬ 
changer  (merchant).  This  implies  that  a  purchaser  is  found, 
who  is  willing  to  pay  the  higher  price,  therefore  the  capital 
of  the  producer  and  the  capital  of  the  merchant  is  enabled 
to  reproduce  itself  with  a  profit,  by  the  custom  of  the  consumer . 

||  “  Custom  is  to  production  (and  distribution)  as  rain  to  the  seed 
and  sunshine  to  the  harvest.” 

Therefore  the  great  nourisher  of  all  enterprise  is  another 
form  of  capital,  which  is  as  essential  to  rendering  the  capital 
of  the  producer  or  merchant  able  to  reproduce  itself  as  are 
the  soil,  rain  and  sunshine,  to  rendering  the  seed  able  to 
produce  a  fruitful  harvest.  Although  never  invested  nor 
ever  owned  primarily,  except  by  the  consumer,  it  fre¬ 
quently  has  a  commercial  value  placed  upon  it  for  others, 
as  is  shown  by  the  estimated  value  placed  upon  the  “  good 
will  ”  of  an  established  business,  the  established  reputation 
of  an  article,  or  the  high  price  paid  for  the  services  of 
certain  salesmen  who  “control  a  large  amount  of  trade.” 

As  has  been  shown,  the  accumulations  of  wealth  are 
created  by  the  profit  made  on  commercial  transactions. 
This  profit  is  the  result  of  the  action  of  consumers  in  buying 
at  more  than  cost,  from  producer  or  merchant.  If  a  large 
number  of  consumers  patronize  one  merchant,  all  of  the 
profit  on  their  transactions  with  him,  will  belong  to  him, 
and  he  ivill  accumulate  wealth .  If  the  same  consumers, 
through  a  “Co-operative  Distributive  Association,”  put 
their  manager  in  the  place  of  the  merchant,  and  in  that  way 
patronize  themselves,  the  profit  on  their  transactions  with  their 
manager  will  belong  to  themselves ,  and  they  ivill  accumulate  wealth. 
The  wealth  so  accumulated,  will  be  to  them  the  direct 
product  of  their  “nutrient  capital — custom,”  employed  for 
their  own  benefit. 

Then  again  there  is  “  Physical  Capital,”  used  always  by 
the  workman,  the  physician  or  any  person  who  employs  his 
strength  or  skill  for  a  remuneration.  Whatever  any  person 

$  The  term  cost ,  as  here  used,  includes  the  purchase  price  with  the  merchant’s 
expenses  added. 

!l“  Logic  of  Commercial  Co-operation.”— J.  G.  Holyoake. 


6 


employs  in  his  work  of  a  physical  nature,  his  strength  or 
talent,  or  the  two  combined,  is  to  him,  his  capital,  as  much 
as  the  machinery  he  may  use  to  increase  the  efficacy  of  his 
efforts. 

Considered  in  this  manner,  for  all  practical  purposes, 
when  the  sense  in  which  the  word  “capital”  is  used  is 
limited  strictly  to  the  transactions  of  the  person  or  asso¬ 
ciation  using  it. 

CAPITAL  IS  THAT  WHICH  IS  EMPLOYED  FOR  THE  PURPOSE 
OF  PRODUCING  A  PROFIT. 

This  definition  necessarily  implies  that  the  capital  em¬ 
ployed  should  reproduce  itself,  when  it  is  of  a  material  form- 

•With  this  definition,  the  way  is  clear  to  consider  under- 
standingly,  the  question,  “  How  to  procure  capital  for  a 
distributive  Association?  ” 

The  object  sought  must  determine  the  kind  of  capital 
most  needed.  This  being  a  Distributive  Association,  the 
kind  of  capital  most  needed  is  “  nutrient  capital — custom,” 
which  renders  distribution  necessary. 

To  establish  this  point  very  clearly,  attention  is  asked 
to  the  following  illustrations. 

1st.  If  ten  producers  combine  their  capital  and  labor, 
and  produce  a  certain  quantity  of  sugar  at  a  cost  of  eight 
dollars ,  and  sell  the  same  for  nine  dollars ,  their  capital  and 
labor  has  been  reproductive  and  profitable,  and  made  a  gain 
of  one  dollar ,  which  is  the  property  of  the  association  until 
divided. 

2nd.  If  ten  merchants  combine  their  capital  and  labor, 
and  buy  the  sugar  from  the  producers  at  nine  dollars  and 
sell  it  to  consumers  at  ten  dollars ,  their  capital  and  labor  has 
been  reproductive  and  profitable,  and  made  a  gain  of  one 
dollar ,  which  is  the  property  of  the  merchants’  association 
until  divided. 

3d.  If  ten  consumers  combine  their  necessities,  by 
means  of  a  distributive  co-operative  association,  putting 
their  manager  in  the  place  of  the  merchants,  and  he  buys 
the  sugar  from  the  producers  at  nine  dollars,  and  supplies  it 
to  the  consumers  at  ten  dollars ,  the  same  price  they  paid  the 
merchants  for  it,  this  use  of  their  “nutrient  capital — custom,” 
to  supply  their  own  necessities,  has  been  profitable,  and 
made  a  gain  of  one  dollar ,  which  is  the  property  of  the  con¬ 
sumers’  association  until  divided. 


7 


THIS  IS  THE  PROCESSgBY  WHICH  CAPITALISTS  ARE  MADE. 

No  person  objects  to  being  a  capitalist,  as  that  term  is 
commonly  understood,  his  only  complaint  is  that  he  is  not 
one. 

There  are  in  comparison  few  merchants  and  many  con¬ 
sumers.  it  is  the  object  of  commercial  co-operation  to 
divert  the  accumulations  of  wealth  from  the  few  to  the  many. 
That  this  may  be  accomplished,  the  first  thing  to  do  is  to 
form  an  association, — not  to  start  a  store — an  association  of 
consumers,  who  understand  the  object  sought,  and  who  will 
work  together  for  its  accomplishment. 

They  should  clearly  realize  that  they  are  serving  their 
own  interests  by  giving  the  association  their  custom  for  all 
the  articles  with  which  it  can  furnish  them.  By  doing  this, 
they  simply  transfer  their  nutrient  capital — custom,  from  the 
merchant  to  themselves ,  represented  by  their  manager,  and  by 
so  doing  they  ivill  at  once  cause  the  money  they  spend  to  supply 
their  necessites ,  to  produce  a  profit  for  themselves,  instead 
of  producing  it  for  the  merchant. 

|  “  The  distinction  between  capital  and  liot-capital,  does  not  lie  in 
the  kind  of  commodities,  but  in  the  mind  of  the  capitalist ,  in  his  will  to 
employ  them  for  one  purpose  (or  in  one  way)  rather  than  another.” 

CUSTOM  IS  NUTRIENT  CAPITAL. 

EVERY  PERSON  IS  A  CONSUMER. 

If  a  person  employs  his  nutrient  capital  (by  giving  his 
custom  to  make  a  merchant’s  business  profitable)  the  mer¬ 
chant  becomes  a  capitalist.  If  lie  employs  his  nutrient 
capital  for  his  own  profit,  he  will  become  a  capitalist.  He 
can  only  do  this  by  becoming  a  member  of  a  consumers’ 
association,  founded  on  the  principles  of  commercial  co¬ 
operation,  which  buys  from  the  producers,  sells  to  the  con¬ 
sumers,  and  holds  all  of  the  profits  as  the  property  of  the 
association,  until  divided  equitably  among  its  members. 

THIS  IS  THE  PROCESS  BY  WHICH  HE  MAY  BE  MADE 
A  CAPITALIST, 

Thus,  what  is  called  “  nutrient  capital,”  may  be  profitable 
or  not-profitable  to  a  person,  as  he  wills  to  use  it,  for  his  own 
benefit  or  the  benefit  of  others,  by  giving  his  custom  to  a 
distributive  co-operative  association,  or  to  merchants. 


t  “  Principles  of  Political  Economy.”— J.  S.  Mill. 


8 


It  is  thus  clearly  shown  that  the  form  of  capital  to  be 
secured  first  is 

NUTRIENT  CAPITAL— CUSTOM, 

which  is  procured  by  obtaining  intelligent  persons  to  become 
members  of  the  association. 

The  first  requirement  of  distribution,  is  the  demand  oi 
custom,  which  makes  it  necessary.  The  second  requiremenl 
is  the  labor  necessary  to  effect  the  exchange. 

In  a  distributive  association,  this  labor  is  very  little 
when  its  value  is  compared  with  the  value  of  the  transactions. 
It  should  be  required,  however,  to  be  done  accurately, 
promptly,  honestly,  and  with  good  judgment.  The  form  oi 
capital  to  be  secured,  in  the  second  place,  is 

PHYSICAL  CAPITAL— LABOR. 

in  the  person  of  a  thoroughly  competent  manager. 

When  the  association  is  small,  and  the  transactions  are 
of  the  simplest  character,  some  member  may  volunteer  tq 
devote  the  little  time  required  for  the  business,  without  com¬ 
pensation..  But  as  the  association  is  for  business 
purposes,  it  should  always  pay  a  fair  price  for  any  service 
i^endered  it.  It  should,  as  soon  as  possible,  select  for  a  mana¬ 
ger,  a  person  likely  to  wish  to  continue  in  that  position. 
One  well  qualified  not  only  to  do  the  clerical  work  of  the 
position,  but  equally  well  qualified  to  promote  the  growth! 
of  the  association,  by  securing  an  increase  of  membership. 
That  his  pay  may  not  be  out  of  proportion  to  the  business 
done,  it  should  be  fixed  by  a  small  percentage  on  the  sales, j 
the  arrangement  to  continue  until  the  volume  of  business] 
reaches  a  point  at  which  a  different  arrangement  can  be 
effected  ;  that  is,  a  fixed  salary  can  be  paid,  without  injustice 
to  the  manager  or  the  association. 

The  third  requirement  of  distribution  is  the  buying  oi 
the  commodities  to  be  distributed.  Therefore,  the  form  of 
capital  to  be  secured  in  the  third  place  is 

MATERIAL  CAPITAL— MONEY. 

As  each  consumer  pays  “  his  merchant 5  5  for  whatever  he 
buys,  if  each  member  of  the  association  will  advance  the  date 
of  payment  to  the  time  of  giving  his  order ,  the  manager  will 
always  be  supplied  with  money  with  which  to  make  the 
necessary  purchases. 


9 


Under  this  system  the  association  can  never  make  a  loss, 
oecause  it  will  never  have  anything  at  risk,  and  the  profit 
gained  by  the  purchases  of  the  members  supplying  their 
Dwn  necessities  in  this  way,  will  make  a  surplus  for  division. 

It  is.  however,  for  the  convenience  of  consumers,  that  the 
commodities  for  which  they  must  exchange  their  money,  be 
carried  in  stock  for  their  inspection,  selection  and  division 
into  quantities  as  desired.  As  has  been  shown,  the  capital 
for  the  purchase  of  this  stock,  may  be  created  by  the  profits 
made  from  the  purchases  of  members,  as  mentioned  above. 
Take  the  illustration  already  used.  If  the  one  dollar  profit 
made  by  the  consumers’  association,  be  not  divided,  the 
association  possess  that  much  money  capital ;  with  this, 
suppose  the  manager  buys  ten  packages  of  pepper.  He  sells 
the  pepper  to  the  members  at  fifteen  cents  a  package.  If 
when  he  buys  the  pepper,  he  buys  another  quantity  of 
sugar,  as  before,  to  supply  the  ever  recurring  necessities  of 
the  members,  the  profit  on  the  second  transaction  is,  fifty 
cents  from  the  sale  of  the  pepper,  and  one  dollar  from  the  sale  of 
the  sugar,  which  added  to  the  profit  on  the  first  transaction, 
makes  the  whole  profit  two  dollars  and  fifty  cents,  which  the 
association  holds  as  money  capital.  All  of  which  has  been 
created  by  the  use  of  their  “  nutrient  capital — custom,”  for 
themselves  instead  of  for  the  merchants. 

THIS  IS  THE  PROCESS  BY  WHICH  EACH  PERSON  MAY  MAKE 
HIMSELF  RICHER,  BY  HELPING  HIS  NEIGHBOR 
TO  BECOME  A  CAPITALIST. 

If  the  branch  association  is  organized  with  ten  persons, 
each  of  whom  subscribes  for  but  one  fund  certificate  of  the 
second  class,  the  paid-in  cash  capital  the  first  month,  will  be 
'ten  dollars.  The  second  month,  twenty  dollars.  The  third 
month,  thirty  dollars,  and  so  on.  If  these  ten  persons  will 
agree  upon  a  few  articles  which  they  will  purchase,  as  indi¬ 
cated,  their  capital  will  be  sufficient  for  their  purpose  at  the 
start,  and  will  always  be  sufficient,  if  they  are  good  managers, 
and  will  deal  with  their  association  as  explained,  they  will 
soon  find  that  the  cumulative  force  of  the  business  will  far 
exceed  their  most  sanguine  expectations. 

By  the  provisions  of  the  By-Laws,  all  profits  are  added 
to  the  amount  paid  in  as  monthly  installments  on  the  second 
class  certificates,  until  their  par  value  oi fifty  dollars  each,  has 


10 


been  accumulated.  In  this  way  all  profits  are  kept  in  the 
business  until  each  second  class  certificate  has  reached  what 
may  be  termed  its  maturity .  Under  this  system,  the  cumu¬ 
lative  force  of  the  capital  account  will  be  very  great,  although 
the  progress  may  appear  slow  at  first.  It  will  be  found, 
however,  that  as  soon  as  transactions  are  made  regularly,  and 
the  line  of  commodities  can  be  extended  to  embrace  some  of 
the  articles  on  which  large  profits  are  made,  the  accumulation 
of  profits  will  be  increased  in  the  most  satisfactory  manner. 
For  these  reasons,  although  the  By-Laws  provide  for  a  per¬ 
manent  capital,  represented  by  full  paid  certificates  of  the 
first  class,  on  wdiich  the  profits  are  to  be  paid  aivay  from  the 
association  in  cash,  one  of  the  first  rules  passed  by  the  ex¬ 
ecutive  committee  should  be  “  that  no  certificates  of  the  first 
class  be  sold.” 

That  form  of  investment  is  provided  for  not  to  induce 
money  capital  to  come  into  the  business  at  the  start,  but  to 
keep  it  in,  when  the  second  class  certificates  have  matured. 
Then,  as  those  who  first  formed  the  association  receive  their 
cash  dividends  on  their  first  class  certificates,  full  paid,  they 
can  show  the  money  to  their  neighbors,  and  say  truthfully, 
COMMERCIAL  CO-OPERATION  HAS  ACCOMPLISHED  ITS  OBJECT 

IT  HAS  MADE  ME  A  CAPITALIST. 

The  object  of  commercial  co-operation,  is  to  divert  the 
accumulations  of  productive  capital,  from  the  fewT  to  the 
many.  This  object  is  accomplished  by  an  equitable  division 
of  profits  to  all  the  factors  employed  in  its  production, 
namely, 

CAPITAL  LABOR  AND  CUSTOM, 

“  The  one  needs  the  assistance  of  the  other.” 


i 


PAMPHLETS  Pu1!! 


061618168 

U 


l'SHE 

FOR  DISTRIBUTION. 


No.  1. 


The  Equitable  Distribution  of  Wealth  by  Commercial 
Co-operation  to  Capital  and  Labor  and  Custom. 


No.  2. 

Working  Plan  of  the  Union  Supply  and  Mutual 
Benefit  Co-operative  Association. 


No,  3. 

How  to  Organize  a  Branch  of  the  Union  Supply  and 
Mutual  Benefit  Co-operative  Association. 


No.  4. 

How  to  Procure  Capital  for  a  Distributive  Branch 
of  the  Union  Supply  and  Mutual  Benefit 
Co-operative  Association. 


